SARFII Leader’s Round Table – Opening remarks by Governor Ali Hashim, Maldives Monetary Authority

Esteemed Governors, Management of AFI,
Distinguished delegates,
Ladies and Gentlemen,

Assalam Alaikum and a good afternoon to you all. It is with great pleasure and honor that I welcome you all to the third leader’s roundtable of the South Asia Region Financial Inclusion Initiative (SARFII). I would like to take this opportunity to thank AFI on behalf of the Maldives Monetary Authority and the rest of the region for initiating the establishment of SARFII to promote regional cooperation in financial inclusion throughout the region.

Since the inauguration of SARFII a year ago, during AFI’s GPF 2022, member institutions have worked towards the mutual goal of promoting financial inclusion in the South Asia region. While important strides have been made towards achieving this goal, it is worth noting the significant importance placed on SARFII’s plans to facilitate financial inclusion through digital means. Specifically, digitizing the payment ecosystem in the South Asia region.

In this era of rapidly evolving technology and interconnected economies, the importance of efficient and seamless payment systems cannot be overstated. Payment innovations, driven by advancements in digital technology, are reshaping the way we conduct financial transactions, manage our finances, and drive economic growth. South Asia, with its diverse cultures, economies, and challenges, is poised to reap substantial benefits from embracing these payment innovations.

Recognizing the importance of payment systems in driving financial inclusion and achieving inclusive growth, MMA has recently launched Favara, the Instant Payment System in the Maldives. Favara offers innovative, convenient, and affordable access to digital financial services that will cater to the needs of the various sectors of the economy. Favara will revolutionize the payment ecosystem in the Maldives by facilitating easy, instant, and secure payment services for individuals and businesses alike. Similar to the Maldives, other countries in the region have already implemented instant payment systems in their respective countries. This technological leap towards the digitalization of payments presents a great opportunity to establish instant payment system connectivity in the South Asia region, enabling instant cross-border payments.

The benefits of establishing instant cross-border payment systems within the South Asia region are manyfold. In today’s dynamic and interconnected global economy, ensuring that financial transactions can flow seamlessly across borders is essential for economic growth and prosperity. Instant cross-border payments can significantly benefit our countries by promoting financial inclusion while also contributing to the overall development and prosperity of the region. South Asia being the largest recipient of remittances in the world, the establishment of an instant cross-border payment system would empower individuals with faster remittances, enabling them to support families and invest in their home countries more swiftly.

Such infrastructure would catalyze seamless financial transactions, fostering greater regional integration and trade. By reducing transaction times from days to mere seconds, businesses can operate more efficiently, unlocking new avenues for growth and collaboration across borders. SMEs, which form the backbone of many South Asian economies, can particularly benefit from this in terms of reduced transaction costs, quicker settlement and reduced risks, helping them to achieve operational efficiency. Additionally, access to a prompt, reliable, and secure cross-border payment system would encourage more SMEs to engage in export activities, fostering economic growth in the region.

Similarly, cross-border payments have the potential to benefit the informal sector, which accounts for a significant part of the South Asian economies. The World Bank estimated that in 2020, more than 80% of people under employment in the South Asian region were informal workers, and about 90% of businesses were informal. While the South Asia region continues to recover from the COVID-19 pandemic, we must recognize the crucial role played by the informal sector in minimizing the devasting impact that the pandemic had on our economies. The strength and robustness of the informal sector during COVID-19 helped many economies cope with the impacts of the pandemic and in their efforts to recover. However, despite its significant contribution to the economy, the informal sector is often marginalized due to lack of data. Cross-border payments can help informal workers and businesses receive payments securely and swiftly across borders and also pave the way for them to access formal financial services. The advent of digital financial solutions will enhance financial inclusion while also helping policymakers bridge the gaps in informal sector data. 

The establishment of cross-border payments will not only promote digital financial services in the region but will also help vulnerable populations build resilience against the impacts of climate change, which is a growing concern in the South Asia region. With climate change threating the development and social wellbeing of South Asian economies, countries are adopting inclusive green finance policies to mitigate climate-related risk and build resilience. The Maldives, due to its unique geography, remains highly vulnerable to the impact of climate change, further emphasizing the importance of promoting IGF policies in our nation. A significant barrier that we face in scaling up green finance in the Maldives is the lack of a classification system to identify activities and assets that can be defined as green. Hence, MMA, with AFI’s assistance through the ICI policy grant, is developing a green taxonomy for the Maldives. The proposed taxonomy will assist the banking sector in assessing and classifying economic activities, including those of individuals and SMEs, that contribute to climate change mitigation and adaptation.

Ladies and gentlemen,

As we discuss these crucial developments in the region, we must recognize the importance of a concerted effort and regional cooperation in achieving inclusive growth. The challenges faced by our region, from varying regulatory frameworks to technological disparities, can best be overcome through collaborative initiatives. Regional cooperation towards the harmonization of regulations and payment standards is a crucial step in facilitating instant cross-border payments within the region. By aligning regulations and payment standards, we can eliminate the complexities and inefficiencies that often hinder cross-border transactions. This harmonization not only reduces the costs associated with international payments but also enhances the overall security and transparency of financial transactions.

Regional cooperation also holds the key to addressing security concerns associated with digital payments. Cybersecurity threats are a shared challenge, and by pooling resources and knowledge, we can enhance our collective defense against cybercrimes. Collaborative efforts in cybersecurity can build trust in digital payment systems, encouraging more individuals and businesses to adopt these innovations.

I conclude by once again stressing the importance of establishing an instant cross-border payment system in the South Asia region and the importance of regional cooperation towards achieving this. I would also like to invite SARFII member institutions to form joint collaborations to promote IGF policies in the region as a mitigation measure against the impact of climate change.

I once again thank AFI for their tremendous effort to promote financial inclusion in the South Asia region and around the world. I would also like to thank our wonderful hosts, the Bangko Sentral ng Pilipinas for the warm hospitality and excellent contribution towards making this year’s IGF a successful event.

Thank you.